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Income Tax Appellate Tribunal, DELHI BENCH “SMC”: NEW DELHI
Before: SHRI KUL BHARAT
O R D E R PER KUL BHARAT, JM:
This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-20, New Delhi, dated 29.06.2018, pertaining to the assessment year 2014-15. The assessee has raised following grounds of appeal:
“1. On the facts & circumstances of the case the learned ITO has erred in making the addition of Rs.12,10,583/- on account of excessive expenses. The Id. Assessing officer has made the addition of 40% of certain expenses on account of excessive expenses. The additions made by the Id. Assessing officer are based on conjecture, personal surmise and purely on adhoc basis. All expenses made during the year were solely incurred for the Sumit Juneja Vs. ITO purpose of business and paid for the legitimate needs of the business of the assessee. Therefore, learned Income Tax Officer has recorded baseless finding that assessee has made excessive or unreasonable expenditure. Total sales for the year was Rs. 12,00,21,374/- and for the previous year was Rs. 4,81,85,258/- i.e. increased by Rs. 7,18,36,116/-( Rs. 12,00,21,374/— Rs. 4,81,85,258/-). Total expenditure for the year was Rs. 77,14,600/- and for the previous year was Rs. 17,88,240/- The accounts of the assessee were duly audited by a chartered accountant as per the requirements of the Income Tax Act and there were no expenses debited to the Profit & Loss Account of the assessee which were excessive, not pertaining to business or not supported by documentary evidence. Therefore additions on account of excessive expenses seems purely adhoc, personal opinion, biased and against the law..
The assessee craves leave to add/alter/amend any of the grounds of appeal
on or before the date of hearing.”
2. At the time of hearing no one appeared on behalf of the assessee. It is seen from the record that since 11.01.2021, despite various opportunities, no one has attended the proceedings. Notices of hearing were duly issued to the assessee.
Under these facts appeal of the assessee is taken up for hearing in the absence of the assessee and is being decided on the basis of material available on record.
The only effective grounds involved in this appeal is against sustaining the addition of Rs. 12,10,583/- by the learned Commissioner of Income-tax(Appeals).
The facts giving rise to the present appeal are that in this case assessee filed his return of income declaring an income of Rs. 15,46,470/-. Subsequently, the case was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income-tax Act, 1961, hereinafter referred to as “the Act”, was framed vide order
Sumit Juneja Vs. ITO dated 30.11.2016. While making the assessment the Assessing Officer made disallowance of expenses debited to the profit & loss a/c., for want of supporting evidence. The Assessing Officer disallowed 40% of the expenditure and the same was added back to the income of the assessee. Further, the Assessing Officer made addition on account of interest on TDS and processing fee of Rs. 12,625/- and disallowance u/s 40A(3) of Rs. 82,341/-. Thus, the Assessing Officer assessed the assessee’s income at Rs. 28,52,020/- against the returned income of Rs. 15,46,470/-.
Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals), who, after considering the submissions partly allowed the appeal, thereby the learned CIT(Appeals) confirmed the addition of Rs. 12,10,583/- made on account of disallowance of expenditure @ 40%. However, the addition of Rs. 82,341/- was deleted and disallowance out of interest on TDS and processing fee was restricted to the extent of Rs. 2005/-. Aggrieved against this the assessee is in appeal before this Tribunal.
Learned Sr. DR heavily relied on the decision of the authorities below. He contended that the assessee grossly failed to explain the huge expenses debited in the P&L A/c with the supporting evidences. He submitted that the Assessing Officer gave various opportunities to the assessee to furnish the evidences. He
Sumit Juneja Vs. ITO contended that the huge expenses debited could not be justifiably explained.
Therefore, the authorities below were justified in making the addition.
I have heard learned DR and perused the material on record. I find that the Assessing Officer made addition by observing as under:
The total turnover of the assessee during A.Y. 2014-15 is Rs. 12,00,21,374/- and the above mentioned expenses of Rs. 30,26,458/- contributes 2.52% of total turnover during the year, whereas in the previous year i.e. A.Y. 2013-14 the turnover was Rs. 4,81,85,258/- and the same above mentioned expenses was Rs. 7,47,511/- contributed only 1.55% of total turnover. Due to the inflation of these expenses, the direct impact on the net profit is 2.5% - 1.55% that comes to 0.97% of total turnover during A.Y. 2014-15 and the total increase in the expenses comes to Rs. 11,64,207/- The assessee was again and again given opportunity to produced books of accounts and supporting bills of expenses debited in P&L account but in spite of several opportunities the assessee deliberately avoided the production of books of accounts and related bills of expenses. The copies of bills submitted for the expenses of repair and maintenance are kuccha bills and most of are not related to any repair and maintenance. Hence, in absence of any documentary evidence/supporting bills of expenses and keeping in view the comparison of current year expenses with previous year, which clearly shows that the expenses of same head are inflated by 0.97% . Out of the above mentioned expenses of Rs. 30,26,458/- as mentioned above, expenses of Rs. 12,10,583/- being 40% is disallowed and added back to the income of the assessee.
On the above finding it is seen that the disallowance is made on estimate basis. However, looking to the facts and nature of business of the assessee, it appears that the disallowance is excessive and is made on ad hoc basis. Therefore, looking to the facts and material available on record, I am of the considered view
Sumit Juneja Vs. ITO that disallowance @ 25% would be sufficient to meet the ends of justice.
Assessee’s ground is partly allowed accordingly.
In the result, assessee’s appeal is partly allowed.
Order pronounced in open court on 23rd May, 2022.